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Japan’s G.D.P. Shrinks at Record Pace

HONG KONG — Japan confirmed Wednesday what many had long suspected: that the world’s second-largest economy contracted at a record pace during the quarter that ended March 31, as exports collapsed and companies cut back production.

The Japanese gross domestic product shrank 15.2 percent on an annualized basis. It marked a fourth straight quarter of contraction and the biggest decline since Japan began keeping records in 1955.

It was also a deeper fall than during the last quarter of 2008, when the economy shrank a revised 14.4 percent on an annualized basis.

With shipments overseas down 26 percent from the previous quarter, export-dependent Japan has been harder hit than the United States and Europe as demand evaporated amid the global economic turmoil.

The Japanese contraction in the last quarter from the previous quarter — 4 percent — compares to 1.6 percent shrinkage in the United States and a 2.5 percent fall in the euro zone.

Domestic demand, which has long been feeble because of high household savings rates and years of anemic economic growth prior to the financial crisis, is expected to remain poor as the worsening labor market depresses sentiment, analysts said.

The data Wednesday showed first-quarter consumer spending fell 1.1 percent from the previous quarter, more than analysts had expected.

And business investment in equipment and factories dropped 10.4 percent as Japanese companies raced to rein in costs and output in response to shrinking demand. That decline was much more marked than the 6.7 percent drop in the previous three months, and worse than economists’ forecasts.

Still, other recent statistics suggest the first quarter of this year may have marked a low point, possibly setting the stage for a return to growth, albeit modest and fragile.

The decline in exports is at least slowing, and Japanese industrial output in March rose for the first time in six months and at a far faster pace than analysts had expected, data released at the end of April showed.

On Wednesday, Mazda Motor said it would cancel an earlier plan to idle a key plant for two days next month because demand in Europe was improving, providing anecdotal evidence of the gradual stabilization in the global economy.

In addition, economists expect a plethora of government stimulus measures to bolster economies as the year progresses.

In a research note on Wednesday, economists at Credit Suisse in Tokyo they said that companies have probably made “considerable progress in their capital spending adjustments” by now, and that Japanese consumer spending was set to post its first increase in three quarters on the back of government cash handouts and lower expressway tolls.

This, and an improving outlook for global production, means an expected “annualized growth of around 5 percent in the next few quarters,” they wrote.

Correction: May 20, 2009

An earlier version of this article misstated the decline in Japan's G.D.P. for the quarter that ended March 31. It was 4 percent, not 15.2 percent, which was contraction on an annualized basis.